“The automotive industry in Malaysia needs to be energized and revitalized . . . We cannot continue to have protectionist policies forever. We have committed to open up for the auto sector.”
—Malaysian Deputy Prime Minister Muhyiddin Yassin, via AP (LA Times).
Volt prototype enthusiast Mark Phelan of the Detroit Free Press took his stab at the old “I’m from the government, and I’m here to help” chestnut today. “Is the U.S. government’s rescue plan for General Motors a business strategy or social engineering?” he pondered, perturbed.
“The question arises daily. Seemingly knowledgeable people declare that the government will force GM out of the profitable and important business of selling trucks and family vehicles, allowing it to build only small cars, hybrids and electric vehicles.”
Profitable and important. Family. Only. Ad copy.
GM bondholders have only tendered “a low-single digit percentage” of GM’s $27 billion debt-for-equity swap offerings, reports Reuters. This (along with unfolding government/UAW deals) sets GM on a crash-course for bankruptcy, and a filing is expected as early as tomorrow, according to another Reuters report. Both stories are replete with quotes arguing the inevitability of GM’s debt-swap failure, although with a 90 percent required participation it didn’t take a professional analyst to figure out that GM’s offer was DOA. Next stop, bankruptcy court.
The Wall Street Journal reports the terms of the United Auto Workers (UAW) deal with the feds re: their payoff to join post-bankruptcy “good” GM. Uncle Sam will “contribute” $10 billion worth of stock to the union’s Voluntary Employee Beneficiary Association (VEBA) health care superfund, paying off half of GM’s unfunded obligations in one fell swoop. The Treasury Department will also give the UAW a $2.5 billion promissory note. GM (i.e., the federal government) will pay off the note in cash, in three installments (2013, 2015, and 2017). And just in case that’s not enough to entice the union to join “good” GM, the UAW will also receive 17.5 percent of the new post-C11 GM (no longer a controlling interest) AND stock warrants for an additional 2.5 percent of the reorganized company. The $6.5 billion in preferred stock includes a nine percent cash dividend—that will pay out $585 million annually. Saying that, this is all subject to a federal bankruptcy judge’s approval.
According to the AP, “sections of Broadway from 47th to 42nd streets and 35th to 33rd streets have been closed to cars in a city effort to reduce traffic and pollution and cut down on pedestrian accidents.” According to the NY Post, drivers are “furious,” arguing that the shutdown will actually worsen congestion.
Who’d have thunk it? The New York Times reports that despite being designed to become the world’s cheapest car, the Tata Nano isn’t attracting as many budget buyers as you might expect. Only 20 percent of Nano orders (India market only) are currently for the base model, a $2,600 vehicle. Half of all orders are for the top-of-the-line model, which boasts such ameneties as cup holders and air conditioning but costs some 40 percent more than a base model. When the Nano was announced, its lowest possible cost was widely touted to claims that it would become “India’s Model T.” And though the low-cost-at-all-costs approach hasn’t been wildly popular, orders for the well-optioned model will help Tata stay out of a profit-draining battle on price alone. But that isn’t stopping competitors from planning ever-cheaper models. Renault/Nissan is planning a $2,500 model developed in conjunction with Bajaj Auto. Toyota is also rumored to be pursuing a low-cost car for the Indian market.
[This editorial was sent to us by Charley Territo from the Alliance of Automobile Manufacturers.] For the past eight years, a group that represents aftermarket parts suppliers has lobbied in Congress and state houses across the country for legislation that would give them free access to the intellectual property of automakers. Automakers spend more on research and development than any other industry. The proponents of this legislation can’t keep up. Their hope is that passage of Right to Repair would cut down on the costs and time needed to develop aftermarket parts to compete with OEMs. In practice, this legislation would do nothing to address the problems the CARE coalition says exist. It is a solution in search of a problem.
Curbside Classics is all about serendipity. Good thing too, because how else would I be inspired to write 800 words about the Pontiac Trans Sport? And I don’t just mean stumbling across this bizarre Transvertible. Well, yes, that was good. But I also needed a regular Trans Sport to complement this flight of fancy. Easy, and boring enough. But take a look at the paperback tucked into the dash: John Steinbeck’s “The Wayward Bus”. Two for Two.
It’s pretty quiet today, news-wise. We’re picking-up dribs and drabs from here and there, but it’s the calm before the storm. The big news is, of course, GM’s forthcoming bankruptcy filing. As the Brits would say, it’s all over bar the shouting. Final confirmation arrives at midnight tonight, when the deadline expires for GM’s bondholders’ to swap $27 billion in debt for a 10 percent equity stake in a new GM.
Because people with pom-poms always have great insights. Scott Burgess of the Detroit News and Mark Phelan of the Detroit Free Press have driven the Cruze-based Volt mule, written nearly identical rah-rah routines, and will be taking questions on the vehicle at 2 p.m. Eastern over at GM’s Fastlane Blog. Ironically (or not . . . who can tell anymore?) titled “Journalists To Discuss Chevy Volt,” the discussion is more likely to be indicative of the state of automotive “journalism” (shilling at the OEM’s blog? Really?) than revealing of anything of actual interest about the Volt. But by all means, surf over and ask a few awkward questions for us. For question ideas, start here.
Bidders for Opel need to bump up their commitments to win control of GM’s European arm, Germany’s economic minister tells Automotive News [sub]. Karl-Theodor zu Guttenberg’s announcement came shortly after meeting with Fiat CEO Sergio Marchionne in Berlin. Coincidence? Nein. Fiat has been looking at acquiring the Opel operations along the lines of its Chrysler takeover: financed by desperate governments rather than the automaker itself. “There’s no favorite,” says zu Guttenberg. “Everyone knows that improvements are still necessary.” And as incentive, zu Guttenberg is still floating the possibility of an Opel bankruptcy. If bidders don’t “make credible commitments to preserve German jobs and showed a willingness to assume greater risks,” Germany will allow Opel to fail. After all, what government would hand over an automaker being kept alive with tax money to a foreign firm with a public-money dowry on top? Only America, apparently. Still, the threat could be losing its impact as Germany is also anxious to decide on a bid offer this week. In the spirit of compromise, Fiat is now saying it would accept only €6 billion in German government loan guarantees instead of the €7 billion previously requested.
I always wanted to control the Big Three. Not the once-mighty Detroit automakers but the three biggest personal expenses: house, car, and food. Thankfully, I got lucky with the house. Cars are my living. And food? My wife is an awe inspiring Zen master; I’m still working on spaghetti. But over the course of time our priorities have changed. Health care crept up. Then education. Now it’s saving for the volatile road of the near future. The world has changed, more folks are embracing frugality, and the world of cars reflects this seismic shock.
TTAC’s Best and Brightest spent some time this weekend examining the question of whether or not Chrysler and GM needed to terminate nearly 2000 dealers between them, both pro and con. We didn’t look at WHICH dealers got the axe, for two reasons. First, despite receiving nearasdammit $20 billion in taxpayer money (so far), GM has steadfastly refused to release a list of the 1100 dealers emailed their walking papers. The Huffington Post blog (of all people) has a partial tally, but GM ain’t gonna spill. Which, if you think about it, protects car dealers at the expense of taxpayers, who might not know they’re buying a car from a dead dealer trading. Bastardos! That said, when GM’s Marketing Maven, Mark LeNeve, announced the cull, he claimed that the business brains who made the cut based their decisions largely (if not exclusively) on volume. Chrysler, in contrast, produced a list of the dispossessed—and it’s all over the show. Urban, suburban, large, small, medium; the logic underpinning their choices is an enigma wrapped in a “Dear John” email. Or is it? The internets are abuzz with the tin foil hat-wearing theory that the cuts were made based on partisan politics. Check it out . . .
Top Gear fans know that Europeans treat large American cars with contempt. Although they love our finned Cadillacs and suicide door Lincolns, they view modern “Yank tanks” as large, thirsty, ill-mannered dinosaurs that only escaped extinction thanks to government-sponsored petrochemical profligacy and car buyers’ lack of environmental awareness, taste and brains. With American car companies struggling for survival, with entire U.S. car brands disappearing, this criticism begs a question: has the Yank Tank finally met its comeuppance? Price aside, can America produce anything to compete with BMW’s mid-sizers (never mind their luxury flagships)? To answer this burning question, I tested a trio of America’s finest luxury cars for a week each; the Cadillac DTS, Lincoln Town Car and Chrysler 300c. First, the standard to which these cars should aspire.
The Hoosier State is trying to throw a monkey wrench into Chrysler/Fiat/Uncle Sam’s plan to create a born again American (ish) automaker. Indiana’s State Treasurer, Richard Mourdock, filed papers with judge Arthur Gonzalez, asking the federal bankruptcy court to appoint an examiner to, um, examine ChryCo’s books. Mourdock also wants Gonzalez to take ChryCo away from the Presidential Task Force on Autos (PTFOA) and hand it to an independent trustee. Mourdock claims to be protecting pension funds for his state’s retirees. Chrysler claims his actions would throw the company into liquidation, which would eliminate four thousand Indiana jobs and endanger the incomes of those self same nine thousand pensioners. So there, nuh. The chances of Indiana slowing down the PTFOA fast track strategy are roughly nil; Chrysler accounts for less than one percent of the state’s pensioner fund. So what gives? Make the jump for the real reason Indiana wants to make Chrysler’s life miserable . . .
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